All Forum Posts by: Charles LeMaire

@Justin Eaton - Sorry, but I seem to be the dark cloud on the silver linings.  Some comments, take with a grain of salt!  

* I have no idea what the cost is per-door in NJ, but 10 to 20 doors may not be enough to make syndication worthwhile - syndication lawyers are not cheap.

* My investor group tends to sway away from places that are more tenant friendly than landlord friendly - no idea where NJ falls, but it's worth considering. 

* In every deal I have been involved in, we put professional management in place.  None of us want to buy a job.  And they handle maintenance, personnel, etc. This is usually more cost effective above 60 doors.

* Almost all of our deals attempt to get non-recourse agency loans.  You have to have done an agency loan to get an agency loan, so if you go bigger, you may need a partner.

Best of Luck!

Charles LeMaire

@Alan Zee  --  I'll message you, so that you can ask ...  

But let me try to address the above in general.  

How many beans are in this container...  It is very hard to tell how many Foundation (F) and Personal Students (PS) are active in the group at any moment.  I suspect that only the Sumrok registrar knows the real number at any moment.  Three times a year Brad has the big recruitment events (the R2Rs) so the count increases.  And there are folks that fad away for various reasons; for instance, no investment class is right for everyone. 

All members have access to the same networking meetings - there are 6 per year.  The Fs can go to fewer.  These events typically consist of a 5 or 6 hour bus trip, visiting 5 or 6 properties (BTW, a sample bus trip is included in the R2R event), followed by a social gather that includes food and drink.  Most of the networking events are in DFW area, but there have been some remote ones, eg.  PHX & HOU.

There are some advanced training events that are open to PS only.

Yes, there are FB pages the group in general and some for the PS.  Honestly, I am not a big social media person, so I am not on these much.  But I know know some remote folks that use them.  The Sumrok site has on-line training videos and some other stuff.

You must answer the last question.  You are trading some money for speed, access, knowledge, and experience.   If you are ready to go fast, it is likely worth it, but if not, perhaps you should wait.  

Clearly, I'm tight with the "FORCE", so I know most of the members, or at least, they know me on sight. I am seeing 1 or 2 deal announcement each week. 

@Nick S.  --  I think my friend Paul addressed this, but please don't put words in my mouth.  There is real, useful content and there are seasoned sponsors and investors at the event.  One will get a great overview of MF by attending an R2R and you visit a few complexes where experts point out what makes C and B class. But it is not everything, those two days are augmented by the video training that all members get.  SURPRISE: it is a recruitment event.  At the last few events, there have been about 700 persons, of those, about 150 to 200 are current students, mostly PS and most have done deals.  Of course the PS want to find new money, they're not stupid.  I will be at the next one in NOV (16 & 17) and I've done 49 deals as a passive. 

Regards,
Charles LeMaire

DISCLAIMER: BP is asking... I don't work for Brad, I do volunteer at events, I am a big fan, and he has moved my wife and me from a Coach to a First Class retirement (airline joke). 

Regards,

Charles

@Nick S.undefined

Looking at the pictures of the posters so far, albeit some are blank, there is a bridge, a room and a cat, there is not a lot of GRAY HAIR. My $0.02 follows, but realize it is complex as taxes are non-linear, so I will meander a bit.

As one approaches retirement age, one is invited to all manner of meeting about retirement planning.  Planners used to lead with Social Security (SS), but the confusing rules that allowed huge benefits are now gone, so the concentration seems to be safe money, various annuities, etc.  (As an aside, there is an interesting over funded insurance product that you borrow from for the rest of your life to attain tax free income.)  Most planners seem to only know about mundane Wall St. investments and annuities.  Any real estate other than REITs is foreign and they can't make any money.  I attended one class where they teach how to be on the edge of broke so that you pay no taxes; it didn't seem like a desired target to me.  Note: there are penalties for being successful: more of SS is taxed and you get to pay more for Medicare as income increases. And be aware there are RMD (Required Minimum Distributions) to cause your income to go up.

As to 401Ks and the like.  I suggest getting the match and looking closely looking at the available options (looked at mine, my wife's and my kids', only a few of the mutual funds in each were any good).  Take a good look at the Roth 401K if it is available.  If you change jobs, roll it out as fast as you can.  At age 59.5 do that in-service roll-over.

Participation (any or additional) should be a conscience decision. A major part of that decision should be based on whether or not you expect to be in a lower tax bracket in retirement than you are now.  There is nothing you can do in a qualified plan that you can't do outside the plan, except delay taxes, either on the money in (traditional) or the gain (Roth).  If you analyze the three choices (traditional, Roth, or none), you win if you lower taxes and lose if you don't.  Lower taxes are dependent on GMVT and your income.  I bet GMVT will raise taxes in the future.  As for income, if you do well in RE (unless you can hide it all) your income will likely go up.  And remember RMDs, SS (0%, 50%, 85%), annuities, and pensions (if anyone has one) are are all income and taxed as such.

Given that the tax rates are LOW at this time, contributing to a traditional plan, except for the match, seems really wrong to me. When rates increase, reevaluate.

Personally, I dropped back to match only around 2005 and put my contribution in the Roth as soon as I "woke up".  That choice gave me funds to invest in MF.  The MF investment has done much better that my Wall St (but I'm still there for diversity).

Apologies for rambling...

Regards,

Charles LeMaire 

I think you are asking about your LLC name, not the deal LLC name. I always wonder about "capital" in the name as it implies to me that you are providing money; I think "investments" in the name makes more sense. As for the deal name, I also have an opinion. As passive in a few deals, one of the sponsors does name them after himself. But I am in multiple deals with him so when I get a check, I have a devil of a time figuring out which deal paid -- poor, poor Charles... I suggest some part of the apartment name or the street as part of the deal LLC name.

And BTW there is one "p" in apartments. 

Charles LeMaire

Having invested passively in a few MF deals, I thought I would toss in my $0.02 worth. 

1. Exposure: Most folks have an advisor that is associated with Wall St.  He is not going to mention MF, likely does not know much about it.  Clearly those folks are not on BP. 

2. Awareness: I feel that most folks know or have heard of someone who has done a rental house, heck, there are several shows that glamorize it. I knew nothing about SF or MF until my wife dragged me to a Mentor's recruitment meeting.

3. Perception: Many feel it is very hard or very expensive to do MF.  It really isn't hard, but you need to be knowledgeable (or possibly kiss you funds good-bye). I paid a mentor, but you can read books & BiggerPockets and listen to podcasts. @Russell Brazil The minimum investment has usually been $50K, some $75K and a few $100K.  Occasionally $25K or $40K. 

4. Control: A lot of folks want to be in charge.  A passive does not control the deal. This makes the deals VERY non-liquid for the passive.  They can be more in charge if they do a SF or are the MF sponsor (the MF sponsor has a different task set than a SF operator).  

5. Access: You have to find a sponsor(s) you want to work with.  Folks in TX can just go to a local meet-up, whereas folks in CA may have to travel to a conference; there is more MF activity in Landlord friendly states.

6. Access #2: Syndications are securities and are governed by the SEC, so there are two major deal types: Reg D 506(b) or (c): "B" allows non-accredited but must have relationship,  "C" allows accredited only, but you may advertise.  [Please allow the overview here, I know the nuances.]  So you have to be RICH or be "well acquainted with" the sponsor.  To avoid the heat, the phrase is a "preexisting, substantive relationship".  

7. Belief:  I tell folks what I have done, how it works, and the risks and rewards. (To my old friends, I do not want anyone to be able so say I kept it a secret from you!)  Some folks just are not willing to step out there.

8. Variety:  There are many paths in life, we do not all have to follow any one path!  Some avoid RE, those that do RE, can follow any of a dozen or so paths.

Some comments about some posts above.  

• * We rarely go below 60 units, this is where the cost of getting professional management is reasonable.
• * We usually buy B or C class.  A class is already in great shape, so there is no room for value add. 
• * MF can get non-recourse loans.

Regards and thanks for allowing me to add my comment.

Charles LeMaire

Disclaimer: I have gotten into 49 deals, 14 have sold. Have invested with almost 60 different sponsors and 16 were on their first deal.  I am currently in about 5000 doors - but as a passive, small percentages of each door!  And as mentioned, I do have a mentor, Brad Sumrok, and he has made me wealthy!

You said commercial, but called out "units" so I have my MF hat on; apologies if I missed the point and am completely off target.  

You say you are getting a deal at $400K/door (using your $4M and 10 units).   That sounds like serious 'A' class; there is usually some upside return limitations in A class.

In my world, you would raise $1M and get an agency loan for the $3M (but we are doing B & C class, $60K to $100K/door - no idea what loan you can get on the higher $/door).  The $1M raise is barely enough to make the attorney fee worthwhile.  If the raise is higher and there is little or no leverage, the returns are likely lower.

In my world, the Deal Sponsor hire professional management - a huge positive in my opinion.  The Deal Sponsor takes on Asset Mgt; so there are two folks, a check and balance.  Not sure how you get the 10 units managed at a reasonable cost unless you are doing it yourself for near nothing.

Next, I don't quite get how you syndicate 70% of a deal.  That just sounds like you are keeping more of it as sponsor.  Perhaps this is common, but I have not run across such a hybrid.  And as the attorney fees are about the same (7 units vs 10 units), seems like you are adding a bit more burden to the investors.

As Colton indicated, there are a lot of details left out here.  So it may be just fine.  The fees are higher that many MFs I have done, but the real question is the returns.

Regards,

Charles LeMaire

@Paul Camuto & @Jaron Walling  As you both seem to be Sponsor 'want-to-be' (no offense intended) read The Best Ever Apartment Syndication Book by Fairless & Hicks.  This book does a great job of giving the nuts and bolts of the process.  There are a several other books that you may also want to digest. 

The problem is "Who would give you money with out a track record?"  So consider a Mentor, Partner, or a lot of trusting relatives.  A Mentor/Partner can help avoid costly mistakes and bring investors from their database.  

Syndications are securities and selling them is under the purview of the SEC.  To avoid licensing, you will be operating within Reg D 506(b) or (c) exemptions. In (b), the investor must have a preexisting relationship with a sponsor AND be sophisticated or accredited; even the foolish relatives.  In (c), the investor must be accredited, but you may advertise.  

The next problem is "Who would sell you a place?"  As syndication is expensive, I assume you are going after 60+ units, not 10 units.  Folks that are selling apartments want to deal with folks they know can close the deal. Their brokers make money at sale, not at almost closed, so they may not give a beginner the time of day.  And in this environment, the sellers expect Hard Money, quite a bit of it.

It's not impossible, not at all rocket science.  But you need to know what you are doing.  There are plenty of things that go off the rails and have to be corrected as the deals progress.

My personal path was to meet a Mentor (in 2010).  Personally, I like having a mentor that has presentations and that I can ask questions. I learned, networked, & invested.  To date 14 deals have gone full cycle.

GOOD LUCK,

Charles LeMaire

I'm a long time Brad Sumrok (note, "rok, not "rock") student; he calls it the Eco-System, I like to call it Sumrok University.  Met him in 2010 and joined his network when he started it, about 2012, I think.  You are correct there are two levels:  Foundations is for the person who wishes to learn and be a knowledgable LP (or passive investor).  You get the on-line training and access to the networking events.  Personal Mentoring Student is for the person that wishes to become a GP (or Deal Sponsor).  In addition to the networking and training, you are assigned to a coach that will walk you through the steps of a deal as they come up.  As you get close to closing, Brad will look over the deal (not a guarantee, but a level of idiot proofing) to be sure it makes sense - that you have a high likelihood of creating returns for yourself and your investors.

Multifamily is sometimes a little vague: 5+ units.  Sometimes folks mention small MF, 10 or so units.  This group concentrates on 70+ units. With the small stuff, you buy a job. We always use professional management.  

As a Foundations member you could buy a deal (by yourself or with outsiders), but you may not harvest funds from the network unless you are a Personal Student. 

There are likely some important features that are not coming to mind, but that is the basic overview.

As mentioned above the NETWORK is huge.  Personally, I only invest passively (color me lazy!) so I have access to a huge number of deals from a large number of Deal Sponsors.  I am seeing a couple or so each week at this time.

One misconception I often hear from would be passives is that membership gets you into deals; NO!!!  You have to show up, meet the individual Deals Sponsors, form that relationship.  This is the GYM Rule: It makes no sense to join and then not show up!

Most deals have been Reg D 506(b), which allow sophisticated investors (with that relationship).  But Brad is not a charity, so you have to have some investment money for this to work for you.

I apologize, I am a big FAN!  Brad has been very good for us.  To be clear, I do not work for him, but I do volunteer at most of his recruitment events, so if you come, say hello!  I try to answer all sorts of questions to allay fear of jumping in.

I am a Sumrok student. We concentrate on MF, no SF. Training consists of the week-end Ratrace-to-Retirement recruitment event (3 times/year) and on line videos. There are two programs, Personal Mentoring (GPs) and Foundations (LPs). Both make you members of the networking group, that meets several times a year, facilitating relationships.  The sponsors are actively looking for and finding deal, giving the passives plenty of opportunity to invest. Deals are typical 70 to 250 unit. Professional Mgt is used 99% of the time.

The group did 52 deals in 2018. Headed toward 75 this year. 100+ sponsors & many passives have pulled out $1M. The coach is not a charity, but the coached do get rich.

To sponsor, some sort of coaching is needed. One can passive without a coach.  But Sumrok moves you down your path faster, without costly mistakes.  I volunteer at his events and have two rules for entry: COSCO - you have to have enough money that returns will make the entry feel trivial.  GYM - you have to show up to get benefit. 

I started in 2010, have invested passively in 49 deals, to date 14 have sold - 2 so far this year & I expect 2 more. I, actually WE, my wife & I are partners in this endeavor, have deals in FL, GA, OH, LA, OK, TV, & AZ. Had CO & NM.

Charles LeMaire

This deal is likely too small to syndicate.  The legal fees are non trivial.  

Charles